Municipal Land Management in Asia:
A Comparative Study

Preface

Every day in Asia, the urban population increases by the equivalent of one city of 140,000 people. In fact, the urban population is expected to double over the next 20 years. Cities have so far absorbed their growing numbers in settlements with a varying quality of living mostly located in the urban fringe. However, the shortcomings of present land management systems have gradually become obvious as the urban growth has resulted in negative impacts such as sprawling squatter settlements and traffic chaos. Although appropriate land for housing exists, sometimes in relatively central locations, it is not accessible to vast sections of society because of factors such as land speculation and lack of public investment in infrastructure and transport facilities.

A major revision of current policies and practices regarding land and its planning, development and control are called for in most Asian countries. Such a revision requires bold action in many areas including land-use planning, zoning, infrastructure provision and property taxation to mention only a few.

The purpose of this study is to compile a practical source of land management options and analyse their effectiveness as these are practised in six municipalities in South and South-East Asia which served as case-studies. Additional information has been acquired through available literature, discussions held with experts in the field and questionnaires completed by counterparts in the case-studies. Twenty cities were invited to participate in the study, including two in China and in India respectively. Unfortunately, no Chinese city participated and only Bombay in India returned the questionnaire, but it was received too late for inclusion.

Chapter one contains an introduction and general information about objectives, methodology, justification, structure of the study and problem areas identified by the case-studies. Chapter two describes the six case municipalities. These include the metropolitan cities of Bandung (Indonesia) and Dhaka (Bangladesh), each with a population of several million. Makati (the Philippines), which is part of metropolitan Manila, and Penang Island (Malaysia) are medium-sized municipalities, whereas Hué (Viet Nam) and Kandy (Sri Lanka) are relatively small. It should be noted that it is difficult to draw conclusions for the Asian region from these case-studies partly because the replies were few and their quality varied, and partly because neither China nor India were represented and they constitute about 60 per cent of the urban population of the region.

Chapter three discusses the responsibilities and roles of governments. A considerable part of the disappointing performance of the public sector is caused by overly centralized political structures. The provision of urban infrastructure and services as well as physical planning and monitoring should in medium- and large-size municipalities take place at the municipal level as this level is more sensitive to local needs. On the one hand, research shows that recent decentralization processes have usually been carried out reluctantly by national and state governments and have, therefore, not been very successful. On the other hand, municipalities also need to attract more qualified staff, be more efficient and be allowed to generate more revenues. The case-studies indicated that they had the main responsibility for about half the land management tasks identified for the purpose of comparing the municipalities. The municipalities were, in particular, responsible for physical planning and building control as well as the construction of most types of infrastructure (for example secondary and access roads, water, drainage and street lights) and, to a greater extent, the maintenance of related and other services.

Chapter four examines land tenure systems and squatter settlements. There is typically a confusing mix of overlapping modern and traditional land laws, which is further complicated by informal land rights. Whereas the issue whether individuals can own land has been identified as the major difference between modern formal land tenure systems, research has not been able to establish a link to enhanced efficiency of any particular land tenure system. Freehold lease was clearly more commonly used than leasehold by the case-studies for residential, commercial and industrial land use. The chapter further concludes that, as the ability of cities to absorb the population increase dwindles, poverty is gradually becoming an urban problem and the demand for any type of shelter, including illegal, is increasing. However, governments typically tolerate the existence of squatter settlements nowadays and evictions are getting rarer. Among the case-studies only Dhaka appeared to be facing the problems relating to a large squatter population and many evictions.

Chapter five discusses land use and methods to control its use. Physical planning instruments used by developing countries today have been developed in Europe and typically need adaption before being suitable for Asia. They are generally too static for rapidly growing cities lacking implementable land use control mechanisms and investment priorities. Furthermore, standards for building regulations and lot sizes are too high, and the plans are next to impossible to monitor. More dynamic tools include structure plans and, regarding zoning ordinances, mixed-use zoning and floor area ratios (FAR). As current practices in many situations can be defined as "emergency" planning, that is planning after a problem has emerged, it is important that municipalities define their objectives and adopt clear land policies to be able to influence physical development at an earlier stage. Among the case-studies, some type of city-wide plan was common but updating often proved difficult. Many case-studies identified the monitoring of land-use and regulations as a key problem. Furthermore, municipalities in metropolitan areas experienced problems with the coordination of national and other municipal governments. Regarding the current land use pattern, the responses to the questionnaire indicated that most municipalities had large tracts of agricultural land available in the urban periphery. A large portion of the land was zoned as residential (29 per cent) while very little land was vacant (five per cent). The minimum plot sizes for residential land, ranging from 36 to 152 square metres, was often too large to give low-income groups access to land.

The availability of public land and public land acquisition is analysed in chapter six analyses. The chapter initially describes how large public land banks have failed in the past as the public sector has not been efficient and sensitive to needs. However, a small land bank with certain key plots is essential for the smooth provision of land for the required infrastructure network without governments being forced to pay excessive land prices because of development pressure. Although the use of expropriation is recommended only as a last resort, data from the case-studies indicated that surprisingly large tracts of land had been expropriated. In the case of Hué as much as eight per cent of the total municipal land area had been expropriated during the latest three-year-period for which figures were available whereas the equivalent figure for Kandy was three per cent.

Chapter seven on land development argues that the private sector should play a major role in land development and the provision of housing, possibly in public-private partnerships. The public sector should focus its activities on providing the major infrastructure network. It should especially promote an appropriate development of the urban periphery as that is more cost-effective than investments in already built-up areas. Research suggests that landowners are rarely required to pay the full costs of infrastructure provision in Asia, even within areas where the residents were financially well-off. It is imperative that governments with limited financial resources attain full cost-recovery. There is even a strong case for the public sector to get a large part of the increase in values resulting from the land development process. Furthermore, governments need to make major efforts to reduce the number of administrative procedures required for obtaining permits and approval as well as the time these consume. The complications and delay of the administrative framework contribute to the delay in response of land markets to changing demands of the population and to making land speculation rampant in Asia. However, the lack of alternative investments opportunities are probably the foremost reason for land speculation. All the case municipalities were involved in land development although rarely on a large scale. They used very different methods to control land development. Among them were Penang's innovative honour system which required practitioners to adhere to professional principles. Although almost all case-studies identified land speculation as a major problem, it was strikingly clear from the information provided that serious attempts were rarely made to curb land speculation and to encourage capital investment on land. Whereas Dhaka and Hué did not even levy a property tax on vacant land, no case-study had a windfall profit tax and, where capital gains tax was levied, the tax level was very low and the implementation poor.

The land registration and information systems, which are discussed in chapter eight, are typically a major obstacle to improving land management systems in Asian cities. It is not unusual that only 10 to 20 per cent of transactions are formally registered. A functional land registration system provides tenure security and support for the property taxation system as well as facilitates efficient physical planning and the setting up of a land information system. A land information system is an efficient and cost-effective means of storing, extracting and sharing information on land, such as transactions, land use, land ownership, population densities and land values. In many municipalities, the land registration systems were incorrect, and registering was time-consuming and expensive. Bandung estimated that only about 50 per cent of the land in the municipality had been registered and that only about 25 per cent of applications for land registration had been approved within two years. In Dhaka the land registration fee was as high as 18 per cent of the deed value and there were indications that there had been large-scale fraud related to land registration.

Chapter nine examines property taxation which was typically an under-utilized source of municipal revenue in Asia, contributing less than 20 per cent of the total budget. In comparison, transfers from national and state governments were a larger source of revenues. As the responsibilities of municipalities increase, it is vital that they are provided the opportunity to generate and administer the funds required. Municipal revenues in the case-studies varied substantially. Makati's total revenues were more than US$90 per capita and Bandung's less than US$10. Property tax revenues were highest in Penang, about US$35 per capita and less than US$10 in all the other case municipalities. Dhaka and Makati could independently set tax rates and decide on property tax structures and reductions whereas Bandung and Penang could not.

Access to land for the urban poor, which is discussed in the chapter ten, is definitely a critical issue. As centrally-located land has become very expensive, the urban poor have been "pushed" to the urban periphery where income-generating activities are difficult to find. Municipal governments have not been successful in trying to provide housing opportunities to meet the rapidly increasing demand. To increase the output, governments have gradually adopted the role of facilitators rather than providers. The study reviews a number of current approaches for the provision of low-income shelter. Typically, most of these are too costly for governments and require considerable staff resources to carry out. All the case municipalities made considerable, some even extraordinary, efforts to provide low-income shelter. More conventional methods such as sites-and-services schemes, settlements upgrading and rental housing were preferred. The land value increase had been so substantial in some cities that condominiums and rental housing were utilized to maximize the use of the limited supply of relatively centrally-located land.

Asian cities have faced an uphill task to provide shelter and infrastructure for its growing numbers and it appears that the task will become even more unmanageable. It is, therefore, imperative that they approach the crucial issue of managing its limited supply of land in a professional manner. There is a need to set clear long-term objectives regarding the use of land and to make administrative frameworks more efficient. Municipalities would need to adopt land policies which continue to promote economic development while, at the same time, limit the negative impact on the living environment and economically less affluent income groups.

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